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On Evaluating Fifteen Years of IEA Energy Forecasts

Thanks, that was an interesting link. On the subject of fracking, I must say that I have no idea who to believe at this stage. But I do see the risk of some widespread negative effects if pessimistic predictions prove to be accurate. Together with the reserve currency status of the US Dollar, I see the fracking revolution as a primary reason why the US is doing significantly better than Europe post-2008 despite being weaker in numerous important fiscal indicators. 

December 17, 2014    View Comment    

On Seeking Consensus on the Internalized Costs of Distributed Solar PV

DATA: Global average LCOE for distributed solar: $214/MWh. This is based on capital costs of $3200/kW, a 6% discount rate and a 14% capacity factor. 

November 25, 2014    View Comment    

On Why Wind Farms Can Be Relied On For Almost Zero Power

Good article leading to an easy-to-understand conclusion that wind farms are fuel savers. The attractiveness of wind farms is therefore directly linked to the type of fuel they displace. If they displace uranium, it is pretty much a useless exercise, but if they displace natural gas, things become more interesting. 

System level analyses like Lion Hirth's work or the IEA's recent "power of transformation" often talk about the scenarios of legacy (current capital stock) and transformed (capital stock tailored especially towards integration of variable renewables). The attractiveness of the transformed scenario is always much greater as it contains much more gas (high fuel and low capital costs) as opposed to coal and nuclear (low fuel and high capital costs).

Going from the legacy to the transformed scenario will take decades and will be a big commitment to intermittent "fuel saver" renewables. We should be quite sure about this commitment as the costs of changing our minds half way would be high in terms of time, money and CO2. 

November 17, 2014    View Comment    

On Seeking Consensus on the Internalized Costs of Utility Scale Solar PV

Thanks for the detailed comment. I plan to discuss integration costs of intermittent renewables as an externalized costs in the next section of the Seeking Consensus column. Currently, these costs are mostly externalized because installers receive a fixed income from their PV installations regardless of what the electricity is actually worth at the time of production. This means that, from the point of view of the supplier, PV is as good as baseload (even though that is of course very far from the truth from a system perspective).

I used a 30 year lifetime in my analysis. Real world experience in PV lifetime will indeed be very interesting to observe. In general, PV plants can stay open as long as income from electricity sales exceed O&M costs. As a plant ages, income from electricity sales will decline (due to the forced internalization of intermittency costs and panel degradation) while O&M will go up due to panel wear. 

November 7, 2014    View Comment    

On Renewables Now Cheaper Than Fossil Fuels In Developing Countries

Reality check from the BP Statistical Review:

Total fossil energy consumption increase in non-OECD countries during the 2008-2013 period cited in the article: 1219 Mtoe

Total wind & solar primary energy consumption increase in non-OECD countries 2008-2013: 40 Mtoe

In other words, the great surge in wind/solar over this period was 3.3% of the corresponding increase in fossil fuels over the same period. 

Also, even though it is acknowledged in the text, I'd agree with Joris that the graphs comparing LCOE of wind and solar to industrial and residential electricity prices paint a very misleading picture at first glance. 

Finally, it is best to not bring up the externalities of fossil fuels without noting the intermittency of wind/solar. 

November 7, 2014    View Comment    

On Seeking Consensus on the Internalized Costs of Utility Scale Solar PV

It does look strange that utility scale and residential rooftop solar PV costs the same in China, but this is the data compiled by the IEA and I just presented it as it was given. One reason could be that utility scale solar is mostly built in the sparsely populated western regions of China where solar insolation is good but labour and infrastructure is scarcer, while rooftop solar will be built in the densely populated eastern regions where lots of cheap labour is still available but solar insolation is generally quite poor. 

I also don't see much room for further price reductions in residential rooftop, especially if Chinese labour costs keep rising at the current rate

November 4, 2014    View Comment    

On Seeking Consensus on the Internalized Costs of Utility Scale Solar PV

DATA: Global average utility scale solar PV LCOE: $101/MWh. This is for a capital cost of $1800/kW, a capacity factor of 18% and a discount rate of 6%. The capacity factor is given towards the higher end of the given range of real world results (11-21%) since utility scale PV plants will generally be built in locations with the best solar insolation. 

November 4, 2014    View Comment    

On What is the Potential of Distributed Generation with Storage and Demand Response?

What is the link between power density and line losses / T&D?

I concur in the article that EVs have a good theoretical potential for distributed demand response, so the difference between our views is related only to differences in EV outlook which we have discussed a few times before. 

About TOU charging, this is fine for conventional baseload-dominated power systems where lowest prices occur consistently in the early morning. However, this article is about the potential for distributed PV integration which makes things more complicated. In a future system with a high penetration of intermittent renewables where the optimal charging time will shift from one day to the next, the mass consumer (and the grid operator) would want charging to be fully automated through smart systems. 

November 3, 2014    View Comment    

On Seeking Consensus on the Internalized Costs of Offshore Wind

DATA: Average global offshore wind LCOE: $174/MWh. This is based on a capital cost of $5000/kW, a plant lifetime of 20 years, a capacity factor of 40%, a discount rate of 8% and O&M costs of $100/kW/yr. 

October 28, 2014    View Comment    

On Are Declining Oil Prices Increasing the Risks to OPEC, U.S. Energy Security or Clean Fuels Supplies?

Thanks for the detailed reply, John. 

About the production cost of oil, I'm still a bit confused about the very abrupt step change in costs of oil production. The market behaviour during this century implies that oil can either be conventional at $30/barrel or less or unconventional at $80/barrel or more. It really strikes me as odd that there seems to be almost nothing in between. This situation creates the extreme price volatility we saw over the past decade where prices are very low if conventional oil production is sufficient and very high if not. 

However, the graph compiled by the IEA in my linked post above suggests that there is a lot of oil available in the $40-60/barrel range. Almost all conventional oil and EOR operations can be carried out in this range together with a significant portion of the heavy and tight oil resource base. If this is indeed the case, the oil industry should be able to eventually reach a new steady state in this price range after some time of technology and market adaption. The historical price action where global market prices can either be $30/barrel or $100/barrel (and nothing in between) should only be a transient phase as the market adapts to reaching peak cheap conventional oil.

The danger is, however, that the willingness of the economy to pay $100/barrel for oil can create a strong incentive for those controlling cheap resources to limit production in order to maintain these high prices. I hope this perverse incentive will not have a major effect going forward. If it has, we will have to endure many more years of economic inefficiency until the global economy refuses to pay $100/barrel for oil, either because it simply cannot or because it has reduced demand sufficiently through efficiency and alternative fuels. 

About fertility rates, I have read many times that population is the multiplier of every other aspect of the 21st century sustainability crisis and that economic development is the most effective way in which to reduce population growth (most developed nations are below the replenishment rate). Rapid economic development of poorer nations is therefore absolutely crucial for long term sustainability and cheap oil is essential for making this happen. 

October 26, 2014    View Comment    

On Are Declining Oil Prices Increasing the Risks to OPEC, U.S. Energy Security or Clean Fuels Supplies?

Although a decline in oil prices has some negative consequences for certain groups, the net effect on the world as a whole is definitely positive. In general, higher oil prices increasingly skew the vast economic benefits of oil towards producers, leading to wasteful excesses and general economic inefficiencies in a few countries while overall global economic development is undermined. As estimated earlier, the global average production cost of a barrel of oil (final fuel) is probably around $35, which naturally implies that global market prices around $100/barrel creates an enormously unequal distribution of the economic benefits of oil. 

If certain nations value positive effects of high oil prices more than the positive effects of low oil prices, they can always deploy large taxes (e.g. Europe) or even subsidize more expensive alternative fuels, but in general I think we should embrace lower oil prices and discourage any measures towards artificial inflation of WTI and Brent prices. Oil should be significantly cheaper than it is at present and achieving this price normalization is vitally important for healthy global economic developement which, in turn, is vitally important for achieving rapid reductions in fertility rates and facilitating the global clean energy transition of the 21st century.

October 25, 2014    View Comment    

On Seeking Consensus on the Internalized Costs of Onshore Wind

DATA: Global average onshore wind LCOE: $81/MWh. This is based on a capital cost of $1800/kW, a 25% capacity factor and a 6% discount rate. Onshore wind is deployed roughly equally in developed and developing countries, so the numbers are an average of the high capital costs and lower financing costs in developed nations and the low capital costs and high financing costs in developing nations. 

October 23, 2014    View Comment